COST ACCOUNTING
COST BEHAVIORS
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Fixed cost
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Variable cost
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Direct cost
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Manufacturing cost
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Detailed explanation-1: -In economics, production costs involve a number of costs that include both fixed and variable costs. Fixed costs are costs that do not change when output changes. Examples include insurance, rent, normal profit, setup costs and depreciation.
Detailed explanation-2: -To calculate total manufacturing cost you add together three different cost categories: the costs of direct materials, direct labour and manufacturing overheads. Expressed as a formula, that’s: Total manufacturing cost = Direct materials + Direct labour + Manufacturing overheads. That’s the simple version.
Detailed explanation-3: -Fixed manufacturing costs differ from variable costs in that they do not vary even when the volume of production increases modestly. Variable costs, on the other hand, rise or drop in proportion with the volume of production. For instance, the property tax a company must pay on their factories is a fixed expense.
Detailed explanation-4: -By definition, there are no fixed costs in the long run, because the long run is a sufficient period of time for all short-run fixed inputs to become variable.